US shale revolution hinges on exports, execs say

The United States is uniquely positioned to harvest newly accessible natural gas reserves and sell the fossil fuel overseas — but that hinges on the Energy Department’s support for exports, executives said Wednesday.

Not every country can — or will — mirror the United States’ shale drilling surge, said Chevron Gas and Midstream President Joseph Geagea. That gives the U.S. an edge in competing for surging Asian demand for natural gas, as Japan and other countries move away from nuclear power.

“The U.S. model cannot be easily duplicated,” Geagea told delegates at IHS CERAWeek. “Conditions were right for a shale revolution: Technology and expertise was available; the pipeline infrastructure was very well developed; (and) the regulatory system was conducive.”

The Energy Department is tasked with vetting more than a dozen applications to sell American natural gas to Japan and other countries that don’t have free trade agreements with the United States. Tied to the proposals are plans to build multi-billion dollar facilities for liquefying natural gas and pumping it into tankers to send overseas.

It’s unclear how many export proposals and facilities will win approval from the Energy Department and Federal Energy Regulatory Commission; so far, just one — Cheniere’s Sabine Pass plant in Louisiana — has gotten the government’s blessing.

“LNG projects are massive, complicated and very expensive,” Geagea noted. Getting them off the ground requires “a long-term framework in which free trade principles must apply,” and where those policies aren’t “revisited every few years for political convenience.”

“We really need certainty in that debate,” Geagea added. “Whatever the United States decides to do, we need it to stick . . . so (companies) can have the certainty their investment is not going to be shut off in two years time.”

LNG export terminals are more expensive than the regasification facilities and import terminals built years ago, when the United States was on track to boost the amount of natural gas it bought from other countries. And costs can quickly escalate, noted Peter Coleman, CEO of Australia’s Woodside Energy.

Four of the seven LNG export terminals under construction in Australia have already announced “significant cost increases,” Coleman said. Already, the seven facilities represent some $215 billion in combined investment, Coleman said.

A surge of liquefied natural gas in world markets could cause continued erosion in long-term pricing contracts indexed to oil, executives widely predicted at CERAWeek yesterday. But forecasts differed on whether — and where — new natural gas hubs might develop around the world. Possibilities include Singapore and Shanghai.

Chevron’s Geagea said hubs can develop and be successful if built on liquidity and infrastructure, but “few pipelines go across (Asian) borders.”

Cheniere CEO Charif Souki said natural gas flowing through Europe and Asia will support new hubs.

“If you bring enough liquidity into the market, you will see a hub developing,” he said.

But Souki anticipates natural gas consumers will still buy the fossil fuel in a mix of ways. “It is entirely plausible for a buyer to pick his menu,” Souki said, with some long-term contracts indexed to oil even as he purchases “cheaper gas somewhere else.”

Yves Vercammen, general manager of trading and shipping for ENI, predicted that gas-to-gas indexed contracts are here to stay in Europe, but the jury is out elsewhere.

Photo: Melissa Phillip / Houston Chronicle

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Kate Moscatel begins to pack boxes on the last day of the IHS CERAWeek Thursday, March 8, 2013 at the Hilton Americas in Houston.

Kate Moscatel begins to pack boxes on the last day of the IHS CERAWeek Thursday, March 8, 2013 at the Hilton Americas in Houston.

Photo: Melissa Phillip / Houston Chronicle

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Looking back: A view of the IHS CERAWeek press room during its peak on Wednesday.

Looking back: A view of the IHS CERAWeek press room during its peak on Wednesday.

Photo: Zain Shauk / Houston Chronicle

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The press room today, on Day 5

The press room today, on Day 5

Photo: Zain Shauk / Houston Chronicle

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Michael Dolan, senior vice president of Exxon Mobil, speaks during the IHS CERAWeek session titled The Thirty Year View Thursday, March 8, 2013 at the Hilton Americas in Houston.

Michael Dolan, senior vice president of Exxon Mobil, speaks during the IHS CERAWeek session titled The Thirty Year View Thursday, March 8, 2013 at the Hilton Americas in Houston.

Photo: Melissa Phillip / Houston Chronicle

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IHS CERAWeek 2013 attendees find their seats for the opening CERAWeek session, "Energy Market Outlook: What Will be the Surprises in 2013-and Beyond?"

IHS CERAWeek 2013 attendees find their seats for the opening CERAWeek session, "Energy Market Outlook: What Will be the Surprises in 2013-and Beyond?"

Photo: Nick de la Torre / Houston Chronicle

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Seats are reserved before Bob Dudley, group chief executive at BP spoke at IHS CERAWeek 2013 at the Hilton Americas Wednesday, March 6, 2013, in Houston.

Seats are reserved before Bob Dudley, group chief executive at BP spoke at IHS CERAWeek 2013 at the Hilton Americas Wednesday, March 6, 2013, in Houston.

Belgacem Chariag, president of eastern hemisphere operations for Baker Hughes, speaks at the "Big Crew Change" panel at IHS CERAWeek on Tuesday.

Belgacem Chariag, president of eastern hemisphere operations for Baker Hughes, speaks at the "Big Crew Change" panel at IHS CERAWeek on Tuesday.

Photo: Johnny Hansen / Houston Chronicle

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Hayat Sindi, founder and CEO of the i2 Institute speaks during innovations in energy at IHS CERAWeek.

Hayat Sindi, founder and CEO of the i2 Institute speaks during innovations in energy at IHS CERAWeek.

Photo: Johnny Hanson / Houston Chronicle

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Denis Grimbert, President & CEO, EDF Renewable Energy, says renewable energy and oil are not adversaries during the discussion "What Future for Renewable Energy in an Age of Austerity and Unconventionals" panel during IHS CeraWeek 2013, Thursday, March 7, 2013, in the Americas Hilton Houston in Houston. less

Denis Grimbert, President & CEO, EDF Renewable Energy, says renewable energy and oil are not adversaries during the discussion "What Future for Renewable Energy in an Age of Austerity and Unconventionals" ... more

Photo: Nick de la Torre / Houston Chronicle

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Rustam Bostanov, right, right with Ward Howell and Mark Gyetvay with Novatek great each other as attendees watch on a hallway television, Philippe Sauquet, president of gas and power of Total speaks during panel discussion about the Global Gas Plenary discussion during IHS CERAWeek 2013 Wednesday, March 6, 2013, in Houston. less

Rustam Bostanov, right, right with Ward Howell and Mark Gyetvay with Novatek great each other as attendees watch on a hallway television, Philippe Sauquet, president of gas and power of Total speaks during ... more

Photo: Johnny Hanson / Houston Chronicle

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A packed house for the discussion about The Future of Global LNG at IHS CERAWeek 2013 Wednesday, March 6, 2013, in Houston.

A packed house for the discussion about The Future of Global LNG at IHS CERAWeek 2013 Wednesday, March 6, 2013, in Houston.

Photo: Johnny Hanson / Houston Chronicle

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Attendees pack into a ballroom to listen to Thomas Garcia Blanco, executive director of Repsol, speak during a discussion group titled "Will the Unconventional Revolution be a Global One?"

Attendees pack into a ballroom to listen to Thomas Garcia Blanco, executive director of Repsol, speak during a discussion group titled "Will the Unconventional Revolution be a Global One?"

A group of men talk around a table during IHS CERAWeek 2013's pre-conference day on March 4 at the Americas Hilton Houston.

A group of men talk around a table during IHS CERAWeek 2013's pre-conference day on March 4 at the Americas Hilton Houston.

Photo: Nick de la Torre / Houston Chronicle

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Hisanori Nei, former deputy director general at he Nuclear and Industrial Safety Agency, Councilor at Cabinet Secretariat, talks about what happened when the tsunami hit the Fukushima Daiichi plant during a plenary 'Coping with Disruption: Lessons from Hurricane Sandy Katrina and Fukushima" during IHS CeraWeek 2013, Thursday, March 7, 2013, in the Americas Hilton Houston in Houston. less

Hisanori Nei, former deputy director general at he Nuclear and Industrial Safety Agency, Councilor at Cabinet Secretariat, talks about what happened when the tsunami hit the Fukushima Daiichi plant during a ... more

Bruce March, senior vice president at ExxonMobil Chemical Company, is swarmed by reporters on Tuesday at the IHS CERAWeek energy conference.

Bruce March, senior vice president at ExxonMobil Chemical Company, is swarmed by reporters on Tuesday at the IHS CERAWeek energy conference.

Photo: Johnny Hanson / Houston Chronicle

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Enrique Sira, senior director of Latin America for IHS CERA, listens to a question during the IHS CERAWeek 2013 conference in Houston.

Enrique Sira, senior director of Latin America for IHS CERA, listens to a question during the IHS CERAWeek 2013 conference in Houston.

Photo: F. Carter Smith / Bloomberg

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Al Monaco, president and CEO, Enbridge Inc. speaks during the IHS CERAWeek session titled North American Energy: The New Abundance and What it Means Wednesday, March 6, 2013 at the Hilton Americas in Houston.

Al Monaco, president and CEO, Enbridge Inc. speaks during the IHS CERAWeek session titled North American Energy: The New Abundance and What it Means Wednesday, March 6, 2013 at the Hilton Americas in Houston.

Translators work as Khalid Al-Falih, president and CEO of Saudi Aramco gives the opening keynote address during IHS CERAWeek 2013 on Monday.

Translators work as Khalid Al-Falih, president and CEO of Saudi Aramco gives the opening keynote address during IHS CERAWeek 2013 on Monday.

Photo: Johnny Hanson / Houston Chronicle

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A man translates speakers at the IHS CERAWeek energy conference for international attendees.

A man translates speakers at the IHS CERAWeek energy conference for international attendees.

Photo: Johnny Hanson / Houston Chronicle

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Haruna Masebu director of energy and water from Tanzania listens via translator to a speaker during a discussion on Capturing the Economic Benefits of Energy Development in Africa at IHS CERAWeek 2013 Wednesday, March 6, 2013, in Houston. less

Haruna Masebu director of energy and water from Tanzania listens via translator to a speaker during a discussion on Capturing the Economic Benefits of Energy Development in Africa at IHS CERAWeek 2013 ... more